There has been much attention over the “fiscal cliff” facing the government as the year comes to a close. With so much on the line in the next few weeks many important decisions have to be made regarding a variety of issues, including tax deductions, mortgage debt help, and the nation’s deficit.
On December 30, 2012, terms of the Budget Control Act of 2011 are scheduled to go into effect. This statue was enacted to bring a conclusion to the debt-ceiling crisis of 2011. Many of the terms of this act were designed to cap discretionary spending and, therefore, keep the deficit from rising.
Until now, these terms have been held off, allowing for many of the current policies to benefit citizens. Some of the more notable allowances that could be eliminated later this month are the temporary payroll tax cuts, the end of some tax breaks for businesses, and the mortgage loan interest tax deduction. Additionally, “deep, automatic cuts” could be seen in important areas, like Social Security and Medicare.
Although no agreements have been made, there are essentially three approaches the government can take:
- Let current policies expire, allowing the Budget Control Act of 2011 to be implemented on January 1, 2013.
- Cancel some or all of the scheduled tax increases and spending cuts outlined in the Budget Control Act of 2011.
- Take a middle of the road course allowing some current expirations, while some additions are implemented.